Glass half full or half empty? It all depends on your perspective as India’s automobile retailers released sales figures for last month, the outlook being “cautiously optimistic”.
India sold a total of 18.18 lakh vehicles in August 2023, compared to 17.70 lakh in July, and 16.74 lakh in August of last year. The good news from the figures released by the Federation of Automobile Dealers Association (FADA) on Tuesday morning is that auto sales across the country showed a solid 9 per cent increase compared to the previous year.
The bad news? The state of India’s rural economy, as evinced by specific trends in sales of many categories, including two-wheelers and tractors.
Two-wheelers, an indication of the strength and confidence of the country’s rural economy showed that though it is still in a subdued state, there was a gradual improvement, signalling a nascent recovery.
“Within the 2W segment, the Indian market displayed a complex yet steady landscape,” said FADA president Manish Raj Singhania. “Despite positive growth, consumer sentiment remained ambivalent, impacting conversion rates and intensifying competition among key players,” he said.
However, all is not well in India’s hinterland, as month-on-month figures show tractor sales, another indicator of rural economy’s robustness, experienced a substantial 19 per cent contraction. Point to be noted is that this happened in August, a month when crops and farm planning traditionally take centre stage.
This, when you consider reports that India is poised to experience its weakest monsoon season in eight years could have a pivotal impact on the upcoming Navratri-Diwali shopping period, it is now feared.
Ironically, at the same time, inventory levels for passenger cars have reached an all-time high. This means that cars being shipped by manufacturing companies to dealerships are at a record level, signifying confident sentiments of good sales during the upcoming festive season. In fact, carmakers like Maruti and Hyundai had reported all-time high sales in August, buoyed by the kickstart of the festive season with Onam in Kerala.
“Although the dealership network is buoyed by optimistic sentiment, FADA adopts a cautious stance, in view of the suboptimal rainfall which could potentially affect the forthcoming festive season,” according to a note by FADA.
“The outlook remains cautiously optimistic, shaped by a multitude of factors that vary across vehicle segments. The onset of the festive season, beginning with Onam, has uplifted market mood, improved liquidity and eased earlier bottlenecks in the supply chain across all categories,” it said.
But it went on to add, “rural recovery remains tenuous, contingent on the performance of the final phase of the monsoon season. Lack of sufficient rainfall could precipitate a rise in inflation, adversely affecting consumer purchasing power and diminish demand. (It will) not only jeopardise the yield of the ongoing kharif crops but also cast a shadow on the subsequent sowing season for rabi crops. (It will) be particularly inopportune as they would coincide with the peak of India's festive season, traditionally periods of heightened consumer activity.”
